20 Most Important Terms To Get Started With Your Student Loans
Learning about your student loans can be complicated, and outdated government websites don’t make it any easier. Here at SponsrU, we strive to make student loan language as simple as possible. We’ve listed what we believe are the 20 most fundamental terms to start learning about your student loans. Understand these terms to take the first steps toward effectively managing your student loan debt.
Basics of Student Loans
Student Loans are money that students borrow to attend a college or university.
FAFSA is the Free online Application for Federal Student Aid that determines your eligibility to get student loans, grants, and scholarships. Save the FSA ID you are assigned by Federal Student Aid because you will need it to manage your student loans.
Grants are free money FSA gives to students to pay for school based on their financial need.
Scholarships are free money various organizations give to students to pay for school based on academic, athletic, or other achievement.
Principal is the original amount of money you borrow to pay for school.
Interest is the fee lenders charge so they make money as a reward for giving a loan. You will owe your lender way more money if you do not pay back your interest on time or early.
Capitalization is when interest is added onto principle of the loan because the interest was not paid back on time. Capitalization makes future monthly payments increase because your interest rate is multiplied by a larger principle!!
Consolidation is combining multiple loans into one. It can decrease interest rates and make loans easier to track.
Types of Student Loan Debt
Federal Student Loans are loans provided by Federal Student Aid. Federal Student Aid provides lower interest rates and additional benefits compared to private student loans.
Subsidized Student Loans are federal student loans where federal student aid pays your interest for you while you are in school.
Unsubsidized Student Loans are federal student loans where interest builds up during school.
Private Student Loans are loans provided by anyone other than federal student aid. This includes private lenders, banks, credit unions, and your school.
Student Loan Organizations
Lenders are the private organizations who can give you loans to pay for your tuition.
Servicers are the organizations who help you handle loans. They help with things like making payments, receiving bills, and getting questions answered.
The Financial Aid Office at your school is responsible for helping to make school more affordable for students. They provide grants, loans, and employment for students.
The Bursar’s Office at your school deals with tuition billing and tuition payments.
Federal Student Aid is the government department who fund financial aid for students.
Repayment Period is the amount of time you agree to pay back your loan plus interest. If you accept longer repayment periods (ie. 15 years instead of 10 years) you make smaller monthly payments. But you also pay more money in interest over time.
Grace Period is the amount of time between leaving school and your first scheduled monthly payment. It usually lasts 6 months after graduation, but not always.
Deferment is the amount of time between receiving your loan to pay for school and when scheduled payments begin.
Now you are ready to take the next step. That may be taking out student loans for yourself, finding the information for the student loans you have already taken out, exploring new ways to pay down your debt, or telling your student loan story.
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